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  • Author: Vincent Stamer
  • Publication Date: 01-2021
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: Global container ship movements may reliably predict global trade flows. Aggregating both movements at sea and port call events produces a wealth of explanatory variables. The machine learning algorithm partial least squares can map these explanatory time series to unilateral imports and exports, as well as bilateral trade flows. Applying out-of-sample and time series methods on monthly trade data of 75 countries, this paper shows that the new shipping indicator outperforms benchmark models for the vast majority of countries. This holds true for predictions for the current and subsequent month even if one limits the analysis to data during the first half of the month. This makes the indicator available at least as early as other leading indicators.
  • Topic: Economics, Science and Technology, Trade, Shipping, Machine Learning
  • Political Geography: Global Focus
  • Author: Chuck Fang, Julian Schumacher, Christoph Trebesch
  • Publication Date: 01-2021
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: Sovereign debt crises are difficult to solve. This paper studies the “holdout problem”, meaning the risk that creditors refuse to participate in a debt restructuring. We document a large variation in holdout rates, based on a comprehensive new dataset of 23 bond restructurings with external creditors since 1994. We then study the determinants of holdouts and find that the size of creditor losses (haircuts) is among the best predictors at the bond level. In a restructuring, bonds with higher haircuts see higher holdout rates, and the same is true for small bonds and those issued under foreign law. Collective action clauses (CACs) are effective in reducing holdout risks. However, classic CACs, with bond-by-bond voting, are not sufficient to assure high participation rates. Only the strongest form of CACs, with single-limb aggregate voting, minimizes the holdout problem according to our simulations. The results help to inform theory as well as current policy initiatives on reforming sovereign bond markets.
  • Topic: Debt, Economics, International Political Economy, Law, Credit
  • Political Geography: Global Focus
  • Author: Ingrid Ott, Ivan Savin, Chris Konop
  • Publication Date: 01-2021
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: Taking robotic patents between 1977 and 2017 and building upon the topic modeling technique, we extract their latent topics, analyze how important these topics are over time, and how they are related to each other looking at how often they are recombined in the same patents. This allows us to differentiate between more and less important technological trends in robotics based on their stage of diffusion and position in the space of knowledge, where some topics appear isolated while others are highly interconnected. Furthermore, we propose a novel approach to match the constructed topics to the IFR classification of service robots based on frequency and exclusivity of words overlapping between them. We identify around 20 topics belonging to service robotics. Our results corroborate earlier findings, but also provide novel insights on the content and stage of development of application areas in service robotics. With this study we contribute to a better understanding of the highly dynamic field of robotics and contribute to new practices of utilizing the topic modeling approach.
  • Topic: International Political Economy, Science and Technology, Robotics, Models
  • Political Geography: Global Focus
  • Author: Dennis Görlich, Aoife Hanley, Wan-Hsin Liu, Finn Ole Semrau
  • Publication Date: 12-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: The overarching aim of the study is to investigate the key factors that determine how and how intensively countries can be integrated into the coffee global value chain (GVC) and thus can better reap the globalization benefits. The empirical analysis shows how the international trade in coffee has developed across regions/countries over the past three decades. It provides evidence-based insights into the key determinants of countries’ GVC integration in the coffee industry. It discusses countries’ functional and product upgrading for their GVC integration. Based on the empirical results obtained, policy implications are derived to support the further development of the coffee GVC. This study serves as a background study for the Coffee Development Report 2020 in preparation by the International Coffee Organisation.
  • Topic: International Political Economy, Food, Global Value Chains, Coffee, Value Chains
  • Political Geography: Global Focus
  • Author: Marcel Fratzscher, Tobias Heidland, Lukas Menkhoff, Lucio Sarno, Maik Schmeling
  • Publication Date: 11-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: We construct a novel database of monthly foreign exchange interventions for 49 countries over up to 22 years. We build on a text classification approach that extracts information about interventions from news articles and calibrate our procedure to data about actual interventions. Our new dataset allows us to document stylized facts about the use of foreign exchange interventions for countries that neither publish their data nor make them available to researchers. Moreover, we show that foreign exchange interventions are used in a complementary way with capital controls and macroprudential regulation.
  • Topic: Economics, Foreign Exchange, International Political Economy, Data, Capital Controls
  • Political Geography: Global Focus
  • Author: Manuel Funke, Moritz Schularick, Christoph Trebesch
  • Publication Date: 10-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: Populism at the country level is at an all-time high, with more than 25% of nations currently governed by populists. How do economies perform under populist leaders? We build a new cross-country database identifying 50 populist presidents and prime ministers 1900-2018. We find that the economic cost of populism is high. After 15 years, GDP per capita is more than 10% lower compared to a plausible non-populist counterfactual. Rising economic nationalism and protectionism, unsustainable macroeconomic policies, and institutional decay under populist rule do lasting damage to the economy.
  • Topic: Economics, Nationalism, Populism, Economic Growth
  • Political Geography: Global Focus
  • Author: Gabriel Felbermayr, Mario Larch, Erdal Yalcin, Yoto V. Yotov
  • Publication Date: 09-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: We build on the latest developments in the structural gravity literature to quantify the partial and general equilibrium effects of GATT/WTO membership on trade and welfare. Using an extensive database covering manufacturing trade for 186 countries over the period 1980-2016, we find that the average impact of GATT/WTO membership on trade among member counties is large, positive, and significant. We contribute to the literature by estimating country-specific estimates and find them to vary widely across the countries in our sample with poorer members benefitting more. Using these estimates, we simulate the general equilibrium effects of GATT/WTO on welfare, which are sizable and heterogeneous across members, and relatively small for non-member countries. We show that countries not experiencing positive trade effects from joining GATT/WTO can still gain in terms of welfare, due to beneficial terms-of-trade effects.
  • Topic: International Political Economy, Trade, WTO, GATT
  • Political Geography: Global Focus
  • Author: Helios Herrera, Maximilian Konradt, Guillermo Ordoñez, Christoph Trebesch
  • Publication Date: 09-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: The Covid-19 pandemic is a major test for governments around the world. We study the political consequences of (mis-)managing the Covid crisis by constructing a highfrequency dataset of government approval for 35 countries. In the first weeks after the outbreak, approval rates for incumbents increase strongly, consistent with a global “rally around the flag” effect. Approval, however, drops again in countries where Covid cases continue to grow. This is especially true for governments that do not implement stringent policies to control the number of infections. Overall, the evidence suggests that loose pandemic policies are politically costly. Governments that placed more weight on health rather than short-term economic outcomes obtained higher approval.
  • Topic: Government, Health, International Political Economy, Health Care Policy, Pandemic, COVID-19
  • Political Geography: Global Focus
  • Author: Peter Eppinger, Gabriel Felbermayr, Oliver Krebs, Bohdan Kukharsky
  • Publication Date: 09-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: In early 2020, the disease Covid-19 caused a drastic lockdown of the Chinese economy. We use a quantitative trade model with input-output linkages to gauge the effects of this adverse supply shock in China on the global economy through international trade and global value chains (GVCs). We find moderate welfare losses in most countries outside of China, while a few countries even gain from the shock due to trade diversion. As a key methodological contribution, we quantify the role of GVCs (in contrast to final goods trade) in transmitting the shock. In a hypothetical world without GVCs, the welfare loss due to the Covid-19 shock in China is reduced by 40% in the median country. In several other countries, the effects are magnified or reversed for several countries. Had the U.S. unilaterally repatriated GVCs, the country would have incurred a substantial welfare loss while its exposure to the shock would have barely changed.
  • Topic: International Political Economy, Trade, Pandemic, Global Value Chains, COVID-19, Supply Chains
  • Political Geography: China, Global Focus
  • Author: Ingrid Ott, Susanne Soretz
  • Publication Date: 08-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: This paper analyzes within a spatial endogenous growth setting the impact of public policy coordination on agglomeration. Governments in each of the two symmetric regions provide a local public input that becomes globally effective due to integration. Micro-foundation of governmental behavior is based on three different coordination schemes: autarky, full or partial coordination. Scale effects act as agglomeration force and in addition to private capital agglomeration increase the concentration of the public input. Integration promotes dispersion forces with respect to the distribution of physical capital which are based on decreasing private returns. However, within the governments’ decision on the concentration of the public input, increasing integration reinforces agglomeration because it promotes the interregional productive use of the public input. Taking feedback effects between the private and the public sector into account leads to mutual reinforcement, hence agglomeration forces almost always dominate and the spreading equilibrium becomes unstable. If convergence is a separate (additional) political objective, it needs sustained additional political effort.
  • Topic: Government, International Political Economy, Economic Growth, Public Policy, Private Sector, Capital
  • Political Geography: Global Focus
  • Author: Wolfgang Lechthaler, Mewael F. Tesfaselassie
  • Publication Date: 08-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: We embed human capital-based endogenous growth into a New-Keynesian model with search and matching frictions in the labor market and skill obsolescence from long-term unemployment. The model can account for key features of the Great Recession: a decline in productivity growth, the relative stability of inflation despite a pronounced fall in output (the "missing disinflation puzzle"), and a permanent gap between output and the pre-crisis trend output. In the model, lower aggregate demand raises unemployment and the training costs associated with skill obsolescence. Lower employment hinders learning-by-doing, which slows down human capital accumulation, feeding back into even fewer vacancies than justified by the demand shock alone. These feedback channels mitigate the disinflationary effect of the demand shock while amplifying its contractionary effect on output. The temporary growth slowdown translates into output hysteresis (permanently lower output and labor productivity).
  • Topic: International Political Economy, Global Recession, Labor Issues, Economic Growth, Inflation, Keynes, Capital
  • Political Geography: Global Focus
  • Author: Katharina Lima de Miranda, Lena Detlefsen, Michael Stolpe
  • Publication Date: 07-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: Among measures to fight hospital acquired infections, an emerging epidemic in many countries around the world, adoption of appropriate hand hygiene practices by healthcare workers is considered a priority. Despite their simplicity and effectiveness, healthcare workers’ compliance is poor, with most empirical studies finding compliance rates well below 50% in many countries. Management strategies to increase compliance are often based on the notion that non-compliance is a moral hazard problem, characterized by asymmetric information between hospital management and healthcare workers. In this study, we provide empirical evidence that an individual behavioral characteristic, known as overconfidence, induces many healthcare workers to overestimate their hand hygiene compliance and hence to underperform unknowingly and unintentionally.
  • Topic: Health, International Political Economy, Health Care Policy, Hospitals
  • Political Geography: Global Focus
  • Author: Josefine Quast, Maik H. Wolters
  • Publication Date: 06-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: We propose a simple modification of Hamilton’s (2018) time series filter that yields reliable and economically meaningful real-time output gap estimates. The original filter relies on 8 quarter ahead forecast errors of a simple autoregression of real GDP. While this approach yields a cyclical component that is hardly revised with new incoming data due to the one-sided filtering approach, it does not cover typical business cycle frequencies evenly, but mutes short and amplifies medium length cycles. Further, as the estimated trend contains high frequency noise, it can hardly be interpreted as potential GDP. A simple modification based on the mean of 4 to 12 quarter ahead forecast errors shares the favorable real-time properties of the Hamilton filter, but leads to a much better coverage of typical business cycle frequencies and a smooth estimated trend. Based on output growth and inflation forecasts and a comparison to revised output gap estimates from policy institutions, we find that real-time output gaps based on the modified and the original Hamilton filter are economically much more meaningful measures of the business cycle than those based on other simple statistical trend-cycle decomposition techniques, such as the HP or bandpass filter, and should thus be used preferably.
  • Topic: International Political Economy, GDP, Economic Growth
  • Political Geography: Global Focus
  • Author: David Benček, Claas Schneiderheinze
  • Publication Date: 06-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: Comparing emigration rates of countries at different stages of economic development, an inverse u-shape emerges. Although merely based on cross-sectional evidence, the“migration hump” is widely interpreted as a causal relationship. Therefore, economic progress in developing countries is assumed to increase migration. For policy makers in destination countries that implies a sensitive trade-off between supporting development and reducing immigration pressures. In this paper we investigate whether the migration hump holds up to more scrutiny, finding that the cross-sectional pattern is misleading. Using 35 years of data on migration flows to OECD destinations, we successfully reproduce the hump-shape in the cross-section. However, more rigorous fixed effects panel estimations that exploit the variation over time consistently show a negative association between income and emigration. This result is independent of the level of income a country starts out at and thus casts doubt on any causal interpretation of the migration hump.
  • Topic: Development, International Political Economy, Migration, Economic Growth, Economic Development , Organisation for Economic Co-operation and Development, Emigration
  • Political Geography: Global Focus
  • Author: Sebastian Horn, Carmen M. Reinhart, Christoph Trebesch
  • Publication Date: 06-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: Official (government-to-government) lending is much larger than commonly known, often surpassing total private cross-border capital flows, especially during disasters such as wars, financial crises and natural catastrophes. We assemble the first comprehensive long-run dataset of official international lending, covering 230,000 loans, grants and guarantees extended by governments, central banks, and multilateral institutions in the period 1790-2015. Historically, wars have been the main catalyst of government-to-government transfers. The scale of official credits granted in and around WW1 and WW2 was particularly large, easily surpassing the scale of total international bailout lending after the 2008 crash. During peacetime, development finance and financial crises are the main drivers of official cross-border finance, with official flows often stepping in when private flows retrench. In line with the predictions of recent theoretical contributions, we find that official lending increases with the degree of economic integration. In crises and disasters, governments help those countries to which they have greater trade and banking exposure, hoping to reduce the collateral damage to their own economies. Since the 2000s, official finance has made a sharp comeback, largely due to the rise of China as an international creditor and the return of central bank cross-border lending in times of stress, this time in the form of swap lines.
  • Topic: Debt, International Political Economy, War, History, Financial Crisis, Trade, Banking
  • Political Geography: Global Focus
  • Author: Heiwai Tang, Douglas Zhihua Zeng, Albert Zeufack
  • Publication Date: 06-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: This paper studies the relationship between Asia’s economic engagements in Africa and individual African nations’ participation in global value chains (GVC) over the past two decades. We find that while overall exports from Africa to Asia are still highly concentrated in resource-intensive sectors, a few African countries have exploited the emerging opportunities to diversify export portfolios through exporting to Asia. Each African nation has a distinct main trade partner in Asia, in contrast to the common view that China has become the dominant trade partner of most African nations. Using a panel data set for 46 African countries over 16 years from 2000 and 2015, we find that exports to Asia are positively correlated with exports to the rest of the world, suggesting that in contrast to trade diversion, trade with Asia complements exports to other countries. Asian economic engagement in the continent is associated with countries’ exports “moving up the value chain”, as measured by the upstreamness index proposed by Antras et al. (2012). However, such process was accompanied by a reduction in the length of their production chains, implying that fewer stages and countries are now involved in the production of exported goods.
  • Topic: Development, International Political Economy, Natural Resources, Partnerships, Exports, Trade, Global Value Chains, Data
  • Political Geography: Africa, Asia, Global Focus
  • Author: Liza Archanskaia, Johannes Van Biesebroeck, Gerald Willmann
  • Publication Date: 04-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: We illustrate a new source of comparative advantage that is generated by countries’ different ability to adjust to technological change. Our model introduces substitution of workers in codifiable (routine) tasks with more efficient machines, a process extensively documented in the labor literature, into a canonical 2 × 2 × 2 Heckscher-Ohlin model. Our key hypothesis is that labor reallocation across tasks is subject to frictions, the importance of which varies by country. The arrival of capital-augmenting innovations triggers the movement of workers out of routine tasks, and countries with low labor market frictions become relatively abundant in non-routine labor. In the new equilibrium, more flexible countries specialize in producing goods that use non-routine labor more intensively. We document empirically that the ranking of countries with respect to the routine intensity of their exports is strongly related to labor market institutions and to cultural norms that influence adjustment to technological change, such as risk aversion or long-term orientation. The explanatory power of this mechanism for trade flows is especially strong for intra-EU trade.
  • Topic: International Political Economy, Science and Technology, Innovation, Trade, Trade Policy
  • Political Geography: Global Focus, European Union
  • Author: Jiaming Jiang, Rajeev K. Goel, Xingyuan Zhang
  • Publication Date: 04-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: Whereas technical standards and Standard Setting Organizations (SSOs) are omnipresent and essential to mass production and mass communications, relatively little is formally known about the propensity of firms to belong to certain SSOs. This paper uses a social network analysis technique to empirically analyze the behavior of market participants and their propensities to belong to SSOs. We concentrate our study on standard setting organizations features and their intellectual property rights (IPR) policies such as licensing rules, disclosure requirements, as well as the features of the decision process of standards. Using data on more than 1060 member firms as participants in 28 SSOs, we are able to uniquely graph the membership of firms in SSOs by highlighting some important characteristics. Finally, a multinomial logit regression analysis studies the propensities of firms to belong to four SSOs and member firms’ network communities.
  • Topic: International Political Economy, Intellectual Property/Copyright, Networks
  • Political Geography: Global Focus
  • Author: Jens Boysen-Hogrefe, Vincent Stamer
  • Publication Date: 03-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: We provide a calculation tool to assess the properties of a maximumlikelihood (ML) estimator that extrapolates the true prevalence of an infectious disease from a random sample. The tools allow the researcher to correct for the specificity and sensitivity of the underlying medical test, calculate the standard deviation of the estimator and to plan the needed sample size. This document explains the underlying methods of the calculation tools and provides instructions for their proper use. We apply an adaption of the epidemiological SEIR-model to show that ML-estimators from random sampling tests provide a more realistic rate of infection than common approaches.
  • Topic: Economics, International Political Economy, Infectious Diseases
  • Political Geography: Global Focus
  • Author: Wolfgang Lechthaler, Patrick Ring
  • Publication Date: 03-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: How the provision of unemployment benefits affects employment and unemployment is a debated issue. In this paper, we aim at complementing theoretical and empirical contributions to this debate with a laboratory experiment: We simulate a job market with search effort and labor force participation decisions while varying the maximum length of unemployment benefit eligibility. Our results reveal two separable, opposing effects: Individuals within the labor force search with lower effort when unemployment benefits are extended. However, individuals are more likely to participate in the labor force and to actively search for a job. Concerning employment, the second effect dominates so that unemployment benefits raise employment.
  • Topic: Economics, International Political Economy, Markets, Labor Issues, Employment, Unemployment, Job Creation
  • Political Geography: Global Focus
  • Author: Holger Görg, Haiou Mao
  • Publication Date: 02-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: This paper evaluates firms’ exporting responses to BRI and considers their heterogeneity in ownership types, product types, regional origin and trade mode. This is done by analyzing firm-product-destination level customs data from 2011 to 2015 in a gravity model framework. Our empirical results show that aggregate export behavior did not change significantly after BRI. However, ownership matters when evaluating firms’ reactions. SOEs increase their total exporting and average export value (the intensive margin) to BRI countries, while private domestic firms show no reaction to BRI at any margin. Further, our results on regional heterogeneity suggests that “open through the west”, i.e., boosting the development of western regions in China, did not appear to work in the short term. Our findings show clearly the implications of BRI’s impact from a firm level perspective.
  • Topic: International Political Economy, Belt and Road Initiative (BRI), Exports, Trade, Economic Development
  • Political Geography: China, Global Focus